In January 2020, Larry Fink, the chief executive of BlackRock, the largest asset manager in the world, stunned the business world by declaring that he intended to use the trillions of dollars managed by his firm to address global warming.
“Every government, company, and shareholder must confront climate change,” Mr. Fink wrote, calling for “a fundamental reshaping of finance.”
A few days later, Mr. Fink arrived in Davos, Switzerland, for the World Economic Forum’s annual gathering, donning a scarf featuring a design of the “warming stripes,” a pattern that depicts 150 years of rising global temperatures.
Mr. Fink’s impassioned call to address climate change was the unofficial start of a movement. Nearly every major financial institution was soon pledging to reduce emissions, joining high-minded alliances designed to phase out fossil fuels and promising to support clean energy. Environmental, social and governance factors, known as E.S.G., became a defining feature of Wall Street investing.
But six years later, many of those Wall Street institutions have walked back or abandoned their commitments.
The alliances — like the Net-Zero Banking Alliance and the Net-Zero Asset Managers initiative — that were meant to steer investments toward clean energy and away from fossil fuels have largely fallen apart. Investors have withdrawn tens of billions of dollars each quarter from E.S.G. funds.
While U.S. investment in clean energy has boomed in recent years — reaching $279 billion last year — many large corporations have gone silent on climate change. On company earnings calls, mentions of words like climate and sustainability have plunged by 75 percent over the past year, according to a Bloomberg analysis.
And with President Trump back in office and using the presidency to promote fossil fuels and attack the clean energy industry, Wall Street’s retreat from climate action has coincided with American banks doubling down on coal, oil and gas projects.
These dynamics will be on full display next week, as Mr. Fink, now co-chair of the World Economic Forum, welcomes Mr. Trump to Davos, where climate issues have taken a back seat to A.I. and geopolitics.
The story of how Wall Street turned its back on climate change — how a bold attempt to transform finance collapsed — began almost as soon as Mr. Fink and his allies announced their ambitions to use capitalism as a tool to save the planet.
Republican politicians joined conservative activists, including groups funded by the fossil fuel industry, to engineer a sweeping pushback at what they saw as corporate America’s attempt to advance liberal policies.
Their tactics involved filing lawsuits, passing laws, pulling funds out of Wall Street accounts and using social media to tarnish the reputation of individual executives, including Mr. Fink.
In short order, their efforts succeeded in beating back an environmental movement on Wall Street, which from its inception was defined more by idealistic rhetoric than substantive changes to business practices.
“These institutions signed up without having any clue what they were signing up for,” said Paddy McCully, an analyst at Reclaim Finance, a nonprofit group that pushes Wall Street to address climate change. “They were joining the herd and wanted to look good, but they never had any inclination to change their business model.”
The rise of E.S.G.
It was money, more than anything else, that got Wall Street to care about climate change in the first place.
In 2019, many of BlackRock’s biggest clients, including major Japanese and European sovereign wealth fund pension funds, started asking for more environmentally focused funds. If BlackRock came up with products that promised to benefit the planet, pension funds and sovereign wealth funds said they would entrust the company with even more of their money.
Mr. Fink obliged. BlackRock began designing new environmental funds and soon he was in Davos, wearing the climate scarf.
“Larry decided to be a leader in the bandwagon,” said Mindy Lubber, chief executive of Ceres, a nonprofit organization that works with companies to address climate change. “It worked out until it didn’t.”
Other Wall Street titans quickly followed BlackRock’s lead.
Every major American bank said it would no longer finance drilling in the Arctic National Wildlife Refuge.
JPMorgan said it was “adopting a financing commitment that is aligned to the goals of the Paris Agreement,” the 2015 agreement by most countries on Earth try and keep global warming below 1.5 degrees Celsius.
It was a fashionable pledge, and the movement soon came to encompass everything from investing in environmentally friendly bundles of stocks, to making loans to clean energy companies, to reducing corporate carbon emissions.
But in practice, hitting the goals laid out in the Paris Agreement would have meant engineering a swift, worldwide shift away from fossil fuels and toward clean power sources like wind and solar.
For a bank like JPMorgan, which regularly ranks as the biggest U.S. funder of fossil fuel projects, that would have meant rapidly winding down a lucrative line of business. JPMorgan did not reply to a request for comment.
Sensing momentum, Mr. Fink was even more ambitious in his 2021 annual letter to investors. In it, he promised to report climate impact of all BlackRock’s funds, create custom sustainability products, produce new ways to measure climate risk, and use the voting power of his firm’s holdings to push companies to address climate change.
In the months that followed, JPMorgan, Citigroup and Bank of America collectively pledged to deploy $5 trillion in sustainable finance by 2030 through loans and investments.
Ambitions kept rising at the annual United Nations climate summit in 2021. Known as COP26, the event in Glasgow, Scotland, would be the first such gathering since the pandemic, and its organizers wanted something concrete to show for their efforts.
Mark Carney, who was then fresh off his time as the governor of the Bank of England and is now prime minister of Canada, was brought in to convene a new U.N.-backed group that would encourage the private sector to reduce emissions.
The result was the Glasgow Financial Alliance for Net Zero, or G.F.A.N.Z., which said it would harness the collective might of its members — some $130 trillion in assets — to try and stop global warming.
More than 450 financial groups including BlackRock, Bank of America and Citi signed on. In addition to the main umbrella group, G.F.A.N.Z. came to encompass a handful of industry specific associations including the Net-Zero Banking Alliance, the Net-Zero Asset Managers initiative and the Net-Zero Asset Owners Alliance.
Those alliances were a way for financial firms to signal their support for the highly ambitious goal of eliminating new planet-warming emissions by the year 2050. And joining was easy, requiring little more than an expression of good intentions. With no expectations that banks or investors needed to change their business models, companies signed on to the alliances in droves.
When convincing finance executives they should join the groups, Mr. Carney and his allies emphasized the chance to generate profits.
“Mark Carney pitched this as a money making opportunity,” said Evan Guy, a former adviser to G.F.A.N.Z. “There was trillions to be made.” Mr. Carney did not reply to a request for comment.
Celebrating the launch of the banking alliance, John Kerry, then the U.S. Special Presidential envoy for climate, said, “The largest financial players in the world recognize energy transition represents a vast commercial opportunity as well as a planetary imperative.”
Yet even as Wall Street firms raced to promote their climate bona fides, some executives were skeptical of the new products.
Terrence Keeley, a senior executive at BlackRock who oversaw sovereign wealth funds, pensions and central banks at the time, was among the loudest dissenters.
“All of these E.S.G. funds are wrong,” said Mr. Keeley, who left BlackRock in 2022 and now runs an impact investing firm. “They weren’t going to generate better returns. They are not going to make the world a better place. E.S.G. as an investment thesis should be entirely shut down.”
Mr. Keeley said that even as BlackRock was pushing E.S.G. funds, he was telling his own clients that they should not invest in them.
Internal dissent hardly mattered. Mr. Fink had delivered what the some clients had asked for, and alongside Mr. Carney, he had sparked a global movement.
It all added up to a banner year for BlackRock, which attracted nearly $25 billion in new assets for its E.S.G. funds in 2021.
Backlash
On the same day that executives in Glasgow were promoting their plans to use Wall Street as a force for good, a group of Republican state treasurers were gathered in Orlando, Fla., making plans to stop them.
The treasurers, part of a group called the State Financial Officers Foundation, discussed ways they might prevent their states’ assets from being used to support environmental causes.
Within a matter of months, Republican state treasurers had withdrawn more than $1 billion in funds from BlackRock. Conservative politicians and media pundits began pressuring Wall Street to distance itself from the climate cause.
Backing these efforts were right-leaning research organizations such as the Heritage Foundation and the Heartland Institute, major conservative funders and operatives including the Koch brothers and Leonard Leo, as well as fossil fuel trade groups including the American Petroleum Institute.
As conservative opposition mounted, financial firms found themselves exposed to unexpected legal liabilities.
In 2022, a U.N.-backed group called Race to Zero, which was partnered with G.F.A.N.Z., updated its expectations about what the participating companies would actually do. Among the changes was new language that pushed financial firms to stop doing business with coal companies.
That raised alarm bells on Wall Street, and conservatives pounced. Just one month after the update, a group of Republican activists gathered at a meeting of the American Legislative Exchange Council in Atlanta and discussed how they could target firms participating in G.F.A.N.Z. with antitrust lawsuits.
Critics also accused companies that pursued E.S.G. strategies of neglecting their duty to maximize profits for shareholders.
Responding to concerns from the financial firms, G.F.A.N.Z. severed its ties with Race to Zero in late 2022. But the damage was done.
Republican legislatures around the country introduced more than 100 bills to penalize financial companies that supported E.S.G. practices. Republican state treasurers around the country began pulling money out of BlackRock.
By the end of the year, conservative lawmakers in Texas had opened investigations into BlackRock and other Wall Street firms for their climate commitments and E.S.G. practices, and Republicans in Congress had subpoenaed G.F.A.N.Z., BlackRock and State Street.
Collapse
After President Trump’s re-election in November 2024, almost every major American bank and financial institution withdrew from the Net-Zero Banking Alliance, causing the group to fold.
Then major banks and financial institutions pulled out of Net Zero Asset Managers initiative. Days later, the initiative said it was “suspending activities.” The group now says it will relaunch this year.
Bank of America, which said it would stop financing coal and refrain from financing drilling in the Arctic, walked back those commitments. The company declined to comment.
And BlackRock has slashed its support for social and environmental shareholder proposals.
In a statement, Chris Berger, a BlackRock spokesman, said that the company had built the industry’s largest platform for investing in sustainable business practices and the energy transition, with over $1 trillion in assets under management.
But in Mr. Fink’s most recent letter to investors, there was no mention of climate change. Instead, he emphasized the need for “energy pragmatism.”
“It was a bunch of empty promises from a bunch of Wall Street types who abandoned their pledges when it was no longer convenient,” said a former BlackRock executive who requested anonymity to speak freely about their former employer. “We marched up the hill, and we marched back down it.”
David Gelles reports on climate change and leads The Times’s Climate Forward newsletter and events series.
The post How Wall Street Turned Its Back on Climate Change appeared first on New York Times.
